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European Affairs
The World Trade System after Cancun
We Must Confront our Challenges with an Ambitious Agenda
By R. Michael Gadbaw
As we look for a way forward after the failure of the WTO meeting in Cancun, the international business community has been clear in its continued commitment to multilateralism. Business believes that governments have an obligation to get the Doha Development Round back on track and that bilateral and regional free trade agreements should complement and reinforce the World Trade Organization, rather than undermine it.
Before developing those thoughts further, however, it might be useful to reflect on some the disappointments, and the ironies, that characterized the Cancun conference. Perhaps most prominent among them is the attitude of many of the developing countries. Those that celebrated the collapse of the negotiations included countries that have been among the most significant beneficiaries of opening markets for agricultural goods and services.
Key developing countries, such as Malaysia, India and China, which have benefited from trade liberalization in sectors such as information technology, opposed an ambitious industrial tariff negotiation. The interests of India, for example, were not properly reflected in the role that its representatives played in the negotiations.
There has been much speculation as to what lies behind the attitude of many of these countries. One theory is that it is a kind of paralysis at seeing China come into the global trading system; another that there is a disconnect between the needs of the people and the position of the leadership, which reflects the attitudes of large numbers of vested interests.
It is ironic that so many of the least developed countries are railing against new obligations, even as some of them, most notably Nepal and Cambodia, are seeking to join the WTO as part of their own development strategy. And a number of Non–Governmental Organizations that made their names campaigning for accountability and transparency opposed the transparency agreement in government procurement.
Looking ahead, however, one of the main concerns of the business community is that we ought to keep the focus on the basics – the WTO’s fundamental role in the world is to promote world–based trade liberalization, and that is where it ought to devote its efforts.
We must not forget that Cancun was meant to be a midterm review. The collapse of the talks obscured the fact that a great deal of progress was achieved. Agriculture obviously has to be at the core of our efforts, and a number of useful elements emerged from the discussions in Cancun. We ought to try to work with the best of those, focusing on eliminating the trade–distorting aspects of export and domestic subsidies, including cotton.
Then we ought to look for an ambitious market access result for industrial goods and services. It is clear that these have been an engine for economic growth, and with the prospects for world recovery still uncertain, we should do all we can to help it along through further trade liberalization.
It should be recognized that the European Union made some important concessions in Cancun on investment and competition policy, which, if embraced more widely, could remove a major stumbling block to these negotiations.
And clearly we have to think about how to deal with the developing countries. I believe that the advanced and middle–income developing countries have a much greater responsibility to play a leadership role than they have demonstrated so far.
As for the least developing countries, we ought to recognize that they should only be required to fulfill WTO obligations to the extent that they are able to do so. We must recognize the need for flexibility and special and differential treatment, as loaded as that term has become over the years.
So, there is a way forward, which should be seen in an historical perspective. The WTO, the direct descendant of the GATT, which was founded in 1947, can be seen as an aspiring fifty-something-year-old. That is a difficult age, not just for people, but also for institutions, as the WTO, and perhaps the European Union too, are showing. We should not, however, be thinking about the past, but about the future. As difficult as it is to think in positive terms, we are perhaps suffering from a lack of imagination in not being able to see our way through to a global era of peace and prosperity.
What this takes is leadership. Pascal Lamy, the European Trade Commissioner, and Robert Zoellick, the U.S. Trade Representative, should be focusing on the role they will be playing in history. If we do not have an ambitious agenda, whether it is creating institutions or creating new rules for trade liberalization, there will be bureaucrats on both sides of the Atlantic who will spend their days thinking of ways to gain selfish advantages at the expense of the other side. Mr. Zoellick’s recent letter to WTO Trade Ministers outlining a way to make progress in what otherwise could be a “lost year” seems to have been well received as a possible step in the right direction.
The most compelling reason for the United States and Europe to resolve their differences is the extent of the global challenges that we face. The challenges of integrating China and Russia into the global trading system, for instance, with all the implications for our security and for our prosperity, dwarf in significance the differences that concern us so much when we think about U.S.–EU relations.
We ought to keep that perspective more clearly in mind than we have been doing recently. We have every reason to get back to work on strengthening the multilateral trading system with a renewed sense of purpose and with a renewed sense of the role we will all play in history.
R. Michael Gadbaw is Vice President and Senior Counsel for International Law, and Policy, General Electric Company. He is responsible for GE’s international government relations and is the champion for compliance with GE’s policies on Ethical Business Practices and International Trade Controls. He also serves on the Public Policy Committee of the GE Foundation. Before coming to GE, Mr. Gadbaw was in private practice (1980–1990), most recently as a partner of Dewey Ballantine where he helped form that firm’s international trade group. He is Chairman of the State Department's Advisory Committee on International Economic Policy.